CALIFORNIA ATTORNEY'S FEES

Fee Clause Interpretation: Prevailing Plaintiff Freight Forwarder Improperly Denied Contractual Attorney’s Fees Because Lower Court Erroneously Interpreted The Breadth Of Clauses In One Of Two Contracts

Confusion Arose Because There Were Two Contracts, But The Earlier One Had Terms And Conditions Applying To the Subsequent Contract; Because Fee Reasonableness Not Questioned, 4/3 DCA Remanded With Directions To Enter The Requested Fee Amount.

            Plaintiff freight forwarder had 2013 and 2015 contracts with defendant rice importer requiring reimbursement of certain third-party expenses, with the 2013 contract having a contractual fees clause and with the 2015 contract having no fees clause.  Plaintiff sued for about $36,000 in unpaid third-party expenses, and the trial court awarded $18,213.93 plus interest after a bench trial.  In a prior merits appeal, the appellate court determined that the 2015 contract incorporated the terms and conditions of the 2013 contract—a crucial determination for the end result with respect to fee entitlement.  Plaintiff moved for contractual fees of $31,713.50, but the lower court denied them based on plaintiff’s failure to break the fees down between the 2013 and 2015 contracts. 

            There was a reversal and remand of the fee denial in Western Overseas Corp. v. KRBL, LLC, Case No. G057515 (4^th Dist., Div. 3 June 30, 2020) (unpublished).

            The reason for the reversal/remand was that the lower court failed to adhere to the prior appellate ruling that the 2013 contract terms, including the fee clauses, were part and parcel of the 2015 contract, such that no apportionment was needed.  There were two clear contractual fee clauses in the 2013 agreement which allowed for fee entitlement to plaintiff.  The 4/3 panel, authored by Acting Presiding Justice Aronson, remanded with directions that the lower court award plaintiff the requested fees, rather than determine reasonableness—after all, defendant never challenged the reasonableness of the requested fees.

Fee Clause Interpretation: Successor Trustee Of Decedent LLC Member Entitled To Recover Attorney’s Fees As Prevailing Party In Litigation Against The LLC

Although Successor Trustee Was Not A Member Within the Operating Agreement’s Definition, His Status As Deceased Member’s Legal Representative Exercising Membership Rights Qualified Him For Fees Under The Operating Agreement.

            In Premiere Raspberries, LLC v. Dutra, Case No. H045594 (6^th Dist. May 14, 2020) (unpublished), the Sixth District affirmed an attorney’s fees award to the successor trustee of a limited liability company’s deceased member, with the successor trustee decedent’s rights under the LLC operating agreement.  Although determining that successor was not a “member” under the operating agreement, fee entitlement was existent because successor qualified as a legal representative exercising membership rights—a status allowing recovery of fees in the amount of $16,612.50.  In the process, the appellate court provided a good discussion of California LLC statutes, both the Beverly-Killea Limited Liability Company Act and the subsequent California Revised Uniform Limited Liability Company Act.

Fee Clause Interpretation, Prevailing Party: $290,000-Plus Fee Award To Cross-Complainant Engineering Firm Affirmed On Appeal Because Fees Clause Was Broad Enough To Encompass Quantum Meruit Claims

Adverse Party Should Have Paid Around $57,000 To Other Side, And, If So, It Would Have Been The Prevailing Party!

            Tristar Realty Group, LLC v. Koury Engineering & Testing, Inc., Case No. B294535 (2d Dist., Div. 8 May 14, 2020) (unpublished) is a result demonstrating how the prevailing party determination in a case, where a discretionary call is at issue, many times turns on the equities of the matter.

            In this one, engineering firms and a real estate developer hiring the firms got into a dispute over a “not to exceed” contract even though some of the testimony showed that the developer orally agreed and by some conduct intended to pay the engineering firms for post-Thanksgiving work of between $57,000-$59,000.  In the end, engineering firms obtained a $46,609.91 net judgment after offset of a small recovery to the developer under a quantum meruit theory. The lower court then determined that engineering firms were the prevailing parties, awarding them something north of $290,000 in attorney’s fees under a contractual fees clause.  Developer appealed.

            The 2/8 DCA affirmed.

            The pertinent fees clause encompassed any legal action or other proceeding, including a declaratory relief action, brought to enforce the contract “or because of an alleged dispute, breach, default or misrepresentation in connection with this Agreement.”  This broad language allowed for recovery on both contract and noncontract claims, such as under the quantum meruit theory.  (Maynard v. BTI Group, Inc., 216 Cal.App.4^th 984, 993 (2013).). The appellate court also found helpful the discussion on the “in connection with” language contained in Mountain Air Enterprises, LLC v. Sundowner Towers, LLC, 3 Cal.5^th 744, 758-760 (2017).  Engineering firms were the prevailing parties because they defeated developer’s $477,000 damages claims, even though developer did defeat firms’ $290,000 contract claims.  To developer’s rhetorical argument that it should just have paid the $290,000 “extortionistic” claim given that the eventual fee award was higher, the 2/8 DCA panel responded that if the developer had paid for the $57,000 in post-Thanksgiving work, it would have been the prevailing party. 

Fee Clause Interpretation, Prevailing Party, Section 1717: Defendant Successfully Challenging Plaintiff’s Trial Court Fee Request, Where Plaintiff Declared Prevailing Party Under Contract, Was Not Entitled To Attorney’s Fees As The Prevailing Party

Defendant’s Limited Appellate Court Win Before Did Not Mean He Prevailed—There Can Only Be One!

            Defendant lost an arbitration to plaintiffs who were declared prevailing parties under a contract by the arbitrator.  Plaintiffs moved for recovery of contractual attorney’s fees under Civil Code section 1717, a request granted by the trial court but then reversed on defendant’s appeal based on an insufficient fee submission.  Defendant then moved for attorney’s fees based on the appellate win, a request denied by the trial court after finding he was not the prevailing party.

            The 1/1 DCA affirmed the fee denial in Achterkirchen v. Montiel, Case No. A153560 (1^st Dist., Div. 1 Mar. 24, 2020) (unpublished).

            The problem with defendant’s approach was that he did not prevail overall under the contract, as Civil Code section 1717 requires.  The arbitrator found that plaintiffs prevailed, with defendant simply winning a skirmish on a collateral fee order along the way.  Because there can only be one prevailing party on the contract (Carriere v. Greene, 39 Cal.App.5^th 270, 276-277 (2019) [discussed in our August 28, 2019 post]), defendant was not the one who prevailed.  He argued that the contractual fees clause cut the other way, but the Court of Appeal panel found that “proceeding” encompassed the entire controversy, not just one appeal in isolation.

Allocation, Fee Clause Interpretation, Reasonableness Of Fees: Reducing Requested $1.36 Million Fee Award, By 25% To $943,028, Was No Abuse Of Discretion Based On $1.2 Million-Plus Recovery And Rejection Of Low Ball Defense Settlement Offer

Tort Claim Defense Fees On An Unsuccessful Cross-Complaint Were Interrelated, Thus No Allocation Required; Prevailing Party Clause In Lease Applied So As To Allow Fee Recovery In Broker’s Favor.

            Water Court, LLC v. Adams Wine Group, LLC, Case No. B290799 (2d Dist., Div. 6 Feb. 25, 2020) (lead appeal; unpublished) is an example of where significant attorney’s fees will be awarded and trial judge reductions affirmed where the defendant, a would-be tenant, breached a $1 million “build to suit” office lease and accompanying guaranty.  Landlord eventually was awarded $1,208,032.42 after a jury verdict which was reduced a little over $500,000 through a new trial remittitur.  Landlord was then awarded $943,028 in attorney’s fees under a lease fees clause, out of a requested $1,359,122.50—a 25% reduction (and a little more than the defense expert conceding that $872,441.31 was a reasonable fee award).  The broker was awarded $360,520.50 in fees under a contractual paragraph in the lease. 

          The 2/6 DCA affirmed the fee awards after a small compensatory damage modification for “twice counted” demolition costs.

            Landlord’s $943,028 fee award was proper given (1) a 25% reduction by the trial judge; (2) the guarantor making a low-ball offer to settle for $100,000 six weeks before trial, forcing Landlord to incur another $552,714 in fees/costs, and (3) the trial judge’s reduction such that the hourly rates claimed were “evened out” by the 25% haircut.   The fees incurred by Landlord to successfully fight the defense counter-claims did not have to be apportioned, because they related to common core facts and related legal theories involved in the overall litigation.

            Finally, the Brokers were entitled to $360,520.50 because the lease fees clause included brokers among the “prevailing party” definition, creating a tripartite contract between the lessor, lessee, and broker. 

Fee Clause Interpretation, Section 1717: Plaintiff Nonparty Manager To An LLC Operating Agreement Not Subject To Attorney’s Fees When Losing Tort Claims Against An LLC Member

Even though Plaintiff Was A Suspended Entity, Retroactive Revival Preserved Ability To Oppose Fees Motion, Which Could Still Not Be Granted If No Fee Entitlement.

           In 9450 Topanga Properties, LLC v. Alpine Consultants, LLC, Case No. B293178 (2d Dist., Div. 4 Dec. 23, 2019) (unpublished), plaintiff manager, not a party to an LLC Operating Agreement with a fees clause applicable between the LLC and members, lost fraud claims brought against a defendant member, with managers having a separate management agreement defining rights and obligations as to the LLC.  Defendant member moved for fees under the Operating Agreement fees clause, with plaintiff opposing even though it was a suspended entity.  Plaintiff later revived its status.  The lower court denied fees to defendant, prompting an appeal.

            The 2/4 DCA affirmed.  With respect to the suspension issue, the retroactive revival validated the prior fee opposition.  (Moofly Productions, LLC v. Favila, 24 Cal.App.5^th 993, 1000 (2018).)  However, given there was no fee entitlement basis, the lower court was correct to deny a meritless motion notwithstanding plaintiff’s status.  Losing plaintiff manager was not a party to the Operating Agreement, so there was no fee entitlement as a matter of substantive law.  Beyond that, the action was grounded in tort, not contractually based, an independent reason justifying denial of fees. 

Fee Clause Interpretation: Settlement Agreement Fee Clause Language Did Not Apply To Postjudgment Court Order Violation Activities

Beyond That, Judgment Did Not Have A Fees Award In It.

            In Salcido v. Platinum Home Mort. Corp., Case No. B289010 (2d Dist., Div. 2 Dec. 20, 2019) (unpublished), the trial judge awarded $137,700 in attorney’s fees to a party to a settlement agreement which encompassed “enforcement” or “interpretation” of the agreement, which had been reduced to a judgment which did not contain fees award language.  The 2/2 DCA reversed, finding that the fees involved activities to enforce various court postjudgment enforcement orders, which did not fall within the “enforce/interpret” language of the fees clause.  Furthermore, the settlement agreement had been merged into and extinguished by the judgment, which fatally did not contain a fees award component.

            “Respondents do not cite any case supporting the conclusion that an agreement authorizing attorney fees for a prevailing party in an action to interpret or enforce a settlement agreement applies to an action to enforce court collection orders entered pursuant to a subsequent judgment.”

Fee Clause Interpretation, Indemnity: Prevailing Cross-Complainant Entitled To $87,024.91 In Attorney’s Fees And Costs From Cross-Defendant In Customer Suit Defense Costs

Terms Of The Indemnity Did For Recovery Of Fees And Costs From Cross-Defendant.

            The 2/8 DCA, in ZIM American Integrated Shipping Services, Co. v. GES Logistics, Inc., Case No. B292259 (2d Dist., Div. 8 Dec. 11, 2019) (unpublished), had no trouble interpreting the contractual interpretation reached by a trial judge below.  What happened is that ZIM, which was contracted with by GES to provide shipping services at specified rates, was directed by GES to place a hold on one of GES’s customer’s cargo.  Customer sued ZIM, who in turned cross-claimed against GES based on contractual indemnity language.  The lower court awarded ZIM its legal fees incurred in the customer lawsuit based on ZIM’s cross-complaint against GES.  The fees/costs award totaled $87,024.91.  The appellate court affirmed based on clear contractual language requiring indemnification of fees/expenses incurred to ZIM “as a consequence of ZIM acting in accordance with GES’s instructions and information, or the inaccuracy of insufficiency thereof, ….”

Fee Clause Interpretation, Section 1717: Nonsignatory Prevailing Parties, Alleged To Be Alter Egos, Were Entitled To Attorney’s Fees Under Contractual Fees Clause When They Beat The Alter Ego Allegations

Reynolds Was Controlling, Not Blickman Turkus.

            What happened in Kaddu, Inc. v. Gauze, Case No. H045090 (6^th Dist. Nov. 27, 2019) (unpublished) is that a cross-complainant filed a contractually-based cross-complaint against nonsignatory cross-defendants where they were alleged to be alter egos of the primary cross-defendant.  Cross-complainant sought attorney’s fees, in addition to damages, based on the theory that the nonsignatory cross-defendants were in actuality the “Buyers” under a business purchase agreement given the alter ego theory predicate.  (Of course, the business purchase agreement had a contractual “prevailing party” fees clause.)   Nonsignatory cross-defendants successfully moved for summary judgment, but the lower court denied their request for attorney’s fees because they were not defined “buyers” under the business purchase agreement, relying on Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal.App.4^th 858, (2008) in reaching its conclusion.

            The Sixth District reversed.  The reason why Blickman Turkus was distinguishable had to do with cross-complainant’s alter ego allegations, which under Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 129 (1979) [our Leading Case No. 5] would have exposed nonsignatory cross-defendants to exposure had the alter ego allegations had been proven.  They were not, such that Reynolds controlled over Blickman Turkus. 

Fee Clause Interpretation, Section 1717: Collections Fees/Costs Provision In A Preprinted Form Which Was Incorporated In The Parties’ Bargain Provided Fee Entitlement

Fees Are Costs, And Do Not Have To Be Pled/Proven Unless In A Third Party Tort or Brandt Situation.

            Ya know, fee entitlement under a contractual fees clause can be based on very simple language set forth in a preprinted form.  In Ozuna Electric Co., Inc. v. Integrated Process Control Engineering, Inc., Case No. G056765 (4^th Dist., Div. 3 Nov. 26, 2019) (unpublished), the language was as simple as “All [c]ollection costs and [a]ttorney fees shall be added to the unpaid balance” in an exhibit which was incorporated into the overall bargain between the parties through an integration clause.  A prevailing party in a contract action was awarded fees under this contractual provision, which triggered an appeal by the opposing party.  To no avail—the clause was clear in granting fee entitlement and was integrated into the overall bargain between the parties.  With respect to the argument that fees had to be pled and proven as damages at trial, that is simply not the case because attorney’s fees are costs which do not have to go through this process, except in inapplicable third-party tort or Brandt situations.  Presiding Justice O’Leary authored the 3-0 panel opinion. 

Allocation, Fee Clause Interpretation, Lodestar, Prevailing Party, Reasonableness Of Fees, Section 1717, Settlement: Reasonable Discretion Exercised In Awarding Defendant Only 20% Of Requested $177,712 In Fees

The Legal Principles Of Civil Code Section 1717 and Santisas Governed.

            Both parties appealed the fee results in Rusnak/South Bay v. Glukel Group, Case No. B286513 (2^nd Dist., Div. 3 Sept. 27, 2019) involving a dispute between landlord and tenant – with tenant plaintiff advancing contract and tort claims against landlord. 

            Tenant dismissed its lawsuit during the discovery phase, before depositions took place, and Landlord moved for an award of $177,712 in attorney fees under the lease’s attorney fee provision which entitled the prevailing party to fees.  Although the trial court granted the fee motion, it awarded Landlord with only 20% of the requested fees – apportioning between the contract and tort claims pursuant to Civ. Code section 1717(b)(2), and reducing for excessive and unreasonable fees.  

            On appeal, Landlord argued that it was entitled to all of the fees pursuant to the lease contract, and Tenant argued that Landlord was not the “prevailing party” on the tort causes of action.

            The 2/3 DCA affirmed.  The apportionment and 80% reduction were proper pursuant to the legal principles of Santisas v. Goodin (1998) 17 Cal.4^th 599 [our Leading Case No. 6] and Civ. Code section 1717(b)(2).  First, as to the contract claims, section 1717(b)(2) bars recovery of the fees incurred to defend plaintiff’s contract claims where an action has been voluntarily dismissed as it was here – with Santisas defining the extent of such preclusion to include cases involving a contract that on its own terms authorizes recovery of those fees. 

            As to Tenant’s argument that Landlord was not the prevailing party on the tort causes of action, the 2/3 DCA found the argument meritless – citing the holding in Santisas that the “prevailing party” of tort claims resolved by  voluntary dismissal is governed by the clear and unambiguous language of the contract for purposes of awarding attorney fees.  Here, the relevant fee provision defined “prevailing party” to include “without limitation” a party “who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party . . . of its claims.”  Tenant abandoned its noncontract claims, making Landlord the prevailing party under the unambiguous terms of the parties’ contract. 

Fee Clause Interpretation, Reasonableness Of Fees: Plaintiff Subhauler Winning Net Judgment Of $19,113.84 Was Properly Awarded Contractual Fees Of $100,415

Contractual Fees Do Not Have To Be Proportional And Unsuccessful Efforts Can Be Awarded.

            In Cheema v. L.S. Trucking, Inc., Case Nos. A150234/A151044 (1^st Dist., Div. 4 Sept. 17, 2019) (published), plaintiff, a subhauler for defendant trucking company, won affirmative recovery in the form of a net judgment of $19,113.84.  There was a broad contractual fees clause, which led the trial judge to award plaintiff the fully requested $100,415 in attorney’s fees.

            Both sides appealed, with plaintiff winning some relief on prejudgment interest and penalty denials.  However, the fee award was sustained.  Contractual fees do not have to be proportional to the damages award (Cruz v. Ayromloo, 155 Cal.App.4^th 1270, 1276 (2007)), and trial judges have broad discretion to not reduce fee requests for unsuccessful, albeit nonfrivolous, motions along the way. 

Fee Clause Interpretation: Plaintiff Obtaining Breach Of Contract Damages In Court Lawsuit Was Not Entitled To Fee Recovery, Because Fees Clause Only Applied To Arbitration Results

Contractual Interpretation Of Fees Clause So Confirmed.

           A plaintiff sued and obtained contractual breach damages of $317,512, but really wanted to obtain prevailing party fees under a contractual fees clause.  The trial court did not bite, and the same too for the appellate court in SPAP Company, LLC v. Clinical Products, LLC, Case No. B282405 (2d Dist., Div. 3 Aug. 29, 2019) (unpublished).

            The problem was that the fees clause was contained in a section entitled ARBITRATION, which did not expand its scope outside of that context (unless possibly court-related proceeding related to the arbitration itself).  That required affirmance of the fee denial order, because the relief was obtained in court rather than arbitration proceedings.

Fee Clause Interpretation, Landlord/Tenant: Guarantor Limitation Of Liability Provision Did Not Limit Fee Recovery

Guaranty Limitation Applied Only To Damages, Not To Attorney’s Fees Which Are Costs Instead.

            In Valencia Gateway Retail IV, LLC v. Woltman, Case No. B288726 (2d Dist., Div. 5 Aug. 20, 2019) (unpublished), two defendant guarantors of a breached lease argued that a guaranty liability limitation—“equal to six months’ charges due under the lease” after tenant successfully performed for three years—prevented an award of attorney’s fees against them as non-prevailing parties despite a fees clause in the guaranty stating “[i]f Landlord is required to enforce Guarantor’s obligations by legal proceedings, Guarantor shall pay to Landlord all costs incurred including, without limitation, reasonable attorney’s fees.”  The trial court did not buy the argument, awarding prevailing landlord $30,365.000 in fees under the guaranty fees clause.

            The 2/5 DCA affirmed the fee recovery.  It, too, did not believe that the guaranty limitation applied to fees because the guaranty fees clause was not so limiting, and the limitation only applied to damages rather than costs such as attorney’s fees.

Deeds Of Trust, Fee Clause Interpretation: Narrow Nature Of Lender Fee Clauses In Promissory Note And Deed Of Trust Did Not Allow Fee Recovery To Lender Based On Wrongful Foreclosure Tort Claims

Broader Fee Clauses Might Have Resulted In A Different Conclusion!

            Byun v. Loma Linda University, Case No. E069549 (4th Dist., Div. 2 July 25, 2019) (unpublished), although unpublished, does offer some drafting tips to lenders where wrongful foreclosure cases are brought by borrowers, who prevail and then want to recoup some attorney’s fees. 

            Borrower lost a wrongful foreclosure, declaratory relief, cancellation of instruments, and quiet title action against lender after losing real property in a foreclosure sale.  The defense prevailed at a bench trial, but the trial court denied the lender side’s request for attorney’s fees of $33,917.76 based on fees clauses under the promissory note and deed of trust.  The note provided that the lender was entitled to recovery attorney fees and legal expenses incurred in connection with “hiring or paying someone else to help collect this Note if Borrower does not pay.”  The deed of trust fees clause said this: “If Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys’ fees at trial and upon any appeal.”

            The 4/2 DCA affirmed.  Analytically, it found that Civil Code section 1717 did not apply because it only dealt with contract actions, but that still left a consideration of whether the two fees clauses covered the non-contractual claims at issue.  The appellate court concluded they did not, based on their narrow breadth.  Lender conceded the note clause was not part of collecting on the note, but really only reached tort claims asserted by losing plaintiff.  With respect to the deed of trust, the problem was that lender did not institute an action so that the fees clause was not triggered.  However, the Court of Appeal, in distinguishing a different result in Jones v. Union Bank of California, 127 Cal.App.4^th 542, 544 (2005), did suggest the result might have been very different had the fees clauses extended to “reasonable attorney fees, and all expenses in connection with the protection or realization of the collateral securing the Note” or “proceedings involving Guarantors that in any way affect the exercise by Lender of its rights and remedies hereunder.”  Even unpublished decisions provide valuable drafting tips to future parties and litigants with respect to gaining fee recovery—in a word, use broad language!

Arbitration, Fee Clause Interpretation, Indemnity: Narrow Fee Clause, Allowing Recovery In Arbitration Only, Did Not Confer Fee Recovery For Fees Relating To Litigation

Indemnity Clause Gave No Basis For Fee Recovery, Because It Was Unilateral In Favor Of Unsuccessful Party, Not Allowing For Fee Entitlement--$628,587.50 In Fees Went Away!

            In Club Acacia Community Assn. v. Professional Community Management of California, Inc., Case No. G056313 (4^th Dist., Div. 3 July 11, 2019) (unpublished), a long-time dispute between an HOA, property manager, and contractor over the problematic installation of a fire alarm system at a condominium building resulted in property manager being found liable to HOA for $88,500 after allocation of comparative negligence against HOA and contractor in litigation, but no one pursuing claims in arbitration.  There were two potential fee entitlement provisions: (1) an arbitration clause, but fees to the prevailing party only applied to an arbitration; and (2) an indemnification clause between HOA and property manager, in favor of property manager, for claims arising out of performance of the HOA-property manager contract.  Eventually, the lower court awarded HOA fees in the amount of $628,587.50 against property manager based on the arbitration clause.  Property manager appealed the fee award, to its credit.

            First of all, the indemnity clause did not allow for fee entitlement.  An indemnity clause is not made mutual by operation of Civil Code section 1717, such that HOA could not get fees, because it only favored property manager.  (Building Maintenance Service Co. v. AIL Systems, Inc., 55 Cal.App.4^th 1014, 1029 (1997).)

            Most importantly, the arbitration clause only applied to arbitration activities, such that the litigation attorney’s fees award went POOF!  Respondent HOA offered numerous theories—conduct of the parties and drafting party adverse ambiguities (contra proferentem) arguments—but they were to no avail, based on the unambiguous language that only arbitration fees were to be awarded.  So, in the end, $628,587.50 in adverse fees went away on appeal, in a 3-0 unpublished decision authored by Justice Moore.

Fee Clause Interpretation: “Collection Costs” Fees Clause Of A Narrow Nature Was Interpreted Against Drafting Party And Did Not Include Fees For Defending Counterclaims

Fee Award Remanded For A Restudy, But A 50% Reduction For Overlitigation By Prevailing Party Likely Stands On Remand.

           To take us back to law school days, contra proferentem is Latin for interpreting a contract against the drafter.  That principle was at play in contractual interpretation of the scope of a lender fees clause in Cavalry SPV I, LLC v. Watkins, Case No. D072299 (4^th Dist., Di. 1 July 1, 2019) (published).

            Lender prevailed in a debt collection dispute, including turning back tort and other claims based on borrower’s cross-complaint (counterclaims).   The operative fees clause said this: “Collection Costs.  To the extent permitted by law you are liable to us for our legal costs if we refer collection of your account to a lawyer who is not our salaried employee.  These costs may include reasonable attorney’s fees.  They may also include costs and expenses of any legal action.”  Based on this clause, the lower court awarded lender its costs of prevailing on the debt and in defensing plaintiff’s cross-claims.  The fee award was $134,604.86, with reductions for overlitigation by the lender.

            The 4/1 DCA reversed and remanded based on the conclusion that fees clause did not allow for recovery of work relating to the defense of counterclaims.  The appellate court agreed that the provision was not broad enough to encompass this work, because the counterclaims were much more than a legal action “to collect on the account.”  Given the clause appeared in a one-sided adhesion contract, the terms had to be construed against lender.  However, because the matter had to be remanded anyway, the appellate court did not adopt the 50% reduction for overlitigation per se, although indicating that it could be considered again upon the “re-do.”

Fee Clause Interpretation, Prevailing Party, Section 998, Section 1717: In A 2-1 Split Decision, 2/5 DCA Affirms $28,000 Contractual Fee Award To Prevailing Tenants Based On An Entered CCP § 998 Judgment And On Residential Lease Fee Provisions

Majority And Dissenting Justice Disagreed On The Meaning Of A $500 Fee Cap Provision When Another Provision Discussed Additional Fees Being Within Play.

            We know from 511 S. Park View, Inc. v. Tsantis, 240 Cal.App.4^th 44, 48 (2015) [discussed in our October 10, 2015 post] that courts will honor a contractual “cap” of fees set forth in the language of the fees clause itself.  The next case involves a residential lease with both a “capped” provision and another provision talking about additional fees being available in some situations.  The interpretation of those provisions actually produced a split decision by the 2/5 DCA in Beloit & Associates, Inc. v. Michael, Case No. B286460 (2d Dist., Div. 5 June 21, 2019) (unpublished).

            Plaintiff landlord and defendants/cross-complainant tenants got into a residential lease dispute, resulting in both a complaint and a cross-complaint (with the main dispute apparently centering on a security deposit).  The lease had a primary fees clause with a $500 cap and another fees clause allowing additional fees to landlord if a dispute could not be worked out under certain specified situations.  Ultimately, landlord accepted tenants’ CCP § 998 offer by which landlord obtained nothing under its complaint and tenants obtained $500 on the cross-complaint, with landlord apparently believing that there was a costs waiver based on pre-offer settlement exchanges even though there was no costs waiver in the 998 offer.  Judgment was entered on the 998 offer, and tenants moved for Civil Code section 1717 fees under the fees provisions to the tune of a requested $31,797.50.  The lower court awarded $28,000, provoking landlord’s appeal.

            The majority, in an unpublished opinion authored by Justice Moor, affirmed.  With respect to landlord’s waiver of cost argument, this was rejected because the lack of costs/fees language in the 998 offer allowed tenants to bring a subsequent fee motion.  (Timed Out LLC v. 13359 Corp., 21 Cal.App.5^th 933,944 (2018).)  The pre-offer settlement exchange and subjective belief by landlords’ attorney were irrelevant.  Landlord’s argument that no fees were allowable because there was a voluntary dismissal was plain wrong, because a judgment had been entered in tenants’ favor such that they prevailed.  That brought the majority to landlord’s argument that only $500 could be awarded in fees, but the majority found that the other provision allowing additional fees superseded the cap and was applicable under section 1717 to tenants even though unilaterally worded in landlord’s favor.

            Acting Presiding Justice Baker, in dissent, saw things differently on the “cap” issue.  He believed that it was in play, because the additional fees provision had limiting language which invoked the cap—due to the language “Refer to Lease for limitations” in the second fees clause.  He would have modified the fee award downward from $28,000 to $500.  Here is his ending observation:  “I cannot justify disregarding a glaring error in interpreting the lease documents, one that results in a mistaken award of tens of thousands of dollars in attorney fees, by an overly strict Marquess of Queensbury-type application of appellate brief formatting rules or abstract theorizing about possible concessions made below. I therefore respectfully dissent.”

            BLOG PRACTICE POINTERS—Two practice pointers emerge based on the reasoning from both the majority and dissenting justices.  First, if you want to waive fees and costs, make sure that waiver is clearly set forth in the section 998 offer; do not rely on pre-offer negotiations.  Second, if you want to enforce a fee “cap” in a contract, make sure that the “cap” language is clear and unambiguous in nature, reiterated if there are other addendum provisions relating to fee recovery to avoid a result like the one in this decision.

            BLOG HISTORY UNDERVIEW—This brings us to discuss John Douglas, the 9^th Marquess of Queensberry, the person alluded to by Justice Baker in his dissent.  This Marquess of Queensberry, who was supposedly a beautiful sports boxer himself, helped implement a strict code of conduct/rules for the sport of box (including the use of gloves and rules such as not hitting below the belt).  But there is more.  This M/Q got into a real battle with noted Irish poet and playwright Oscar Wilde.  Based on an apparent homosexual relationship between Wilde and Q/M’s son Alfred, Q/M was angered by things and delivered a calling card “For Oscar Wilde, posing as Somdomite [sic]” at Wilde’s club.  Wilde sued for criminal libel, which led to Q/M’s arrest.  Wilde dropped his libel case because a defense to his claim was that Wilde had sex with other men (with Q/M indicating he intended to present such testimony in his defense).  Q/M then won substantial defense expenses against Wilde based on a counterclaim.  This left Wilde bankrupt, also resulting in his conviction for gross indecency and in two years of hard labor while Wilde was confined to jail.  Wilde then went into exile in France.  Q/M, at the age of 56, died on January 31, 1900.  Months later, Wilde died at the Hotel d’Alsace in Paris, at the age of 46.  Wilde’s last words right before his death were reputed to be something to the effect, “The wallpaper [in the hotel] is terrible—one of us will have to go!”

Fee Clause Interpretation, Section 1717: Fraud-Based Claim Upon Narrow Unilateral Fees Clause Was Not Broad Enough To Allow Fees To Prevailing Fraud Plaintiffs

However, Appellate Court Reversal Of Guaranty Rescission Denial Did Trigger Fee Recovery Under Broad Bilateral Fees Clause.

            If readers follow us over the years (or if you are new to us, welcome), the actual wording of a contractual attorney’s fees clause can be critical in terms of whether it allows fee entitlement.  The disparate language in fees clauses under a lease and guaranty actually led to different results in Orozco v. WPV San Jose, LLC, Case No. H044014 (6^th Dist. June 17, 2019) (published).

            Orozco involved a situation where a plaintiff lessee successfully sued for fraud in the negotiation of a lease because lessor’s agent failed to disclose that there was a lease with a competing-type of food tenant after indicating that there were no other prospects on board.  (NOTE TO TENANTS:  Ask landlord for an exclusivity clause in order to truly protect yourselves.)  However, that was not true, there was a competing lease in the pipeline.  Plaintiff tenant opened with good revenue fanfare, but that died after the competing tenant came aboard.  Plaintiff and an affiliate sued for fraud in the lease negotiation and rescission, with lost profits being awarded on the fraud claims but with rescission being denied (with the lease guarantor seeking rescission of the guaranty).  The lower court denied attorney’s fees to the suing tenant and guarantor.

            The Sixth District affirmed the denial of fees to plaintiffs based on its fraud victory.  The problem was that the predicate lease fees clause was narrow and unilateral to Landlord, limited to disputes “arising from the provisions of this Lease or any default hereunder.”   Even under Civil Code section 1717, the narrow language of the lease fees clause did not encompass a tort dispute which was not one grounded “on the contract.”  However, the appellate court reversed the lower court’s denial of rescission of the guaranty.  The guaranty lease clause was much different.  The guaranty included a provision entitling a prevailing party in “an action against the other arising out of or in connection with this Guaranty” the right to “recover from the other attorneys’ fees and costs, including collection costs incurred.” This expansive language, which applied to any prevailing party (unlike the unilateral language of the lease’s attorney’s fee provision) was sufficient to encompass Orozco’s fraud action and rescission remedy. (Lerner v. Ward, 13 Cal.App.4th 155, 159– 161 (1993) [clause allowing fees in any action or proceeding arising out of the agreement includes a fraud action arising out of the agreement].) So, the matter was remanded to allow the guarantor to obtain some fee recovery, out of a denied initial fee request of $700,000. 

Appeal Sanctions, Fee Clause Interpretation, Section 1717: Absence Of Appropriate Fees Clause Doomed Prevailing Defendants’ Request For $621,328.34 In Attorney’s Fees

However, Plaintiffs/Appellants And Their Appellate Counsel Sanctioned $44,654.64 For Frivolous Appeal.

            In J.B.B. Investment Partners Ltd. v. Fair, Case Nos. A152877/A153698 (1^st Dist., Div. 2 June 4, 2019) (unpublished), plaintiffs prevailed on a breach of contract count through a summary adjudication motion based on defendants’ breach of a settlement agreement and a lot of litigation activity to not pay under the settlement.  Plaintiffs earlier had SLAPPed defendants’ cross-complaint, and were awarded $12, 609 for that successful effort.  Defendants moved for fees of $621,328.34 under Civil Code section 1717, but the lower court denied the request, awarding $4,918 for additional fees relating to the SLAPP proceedings.  Plaintiffs appealed the merits determination, while defendants appealed the fee “denial.”

            Both appeals failed to garner any changes, except for a significant one:  plaintiffs and their counsel were sanctioned $44,654.64 for bringing a frivolous appeal—with the amount going to compensate defendants for responding to the appeal.  (We have seen a recent trend by appellate courts to sanction increasingly for frivolous appeals.)

            With respect to the fee denial, section 1717 does not create an independent right to fees, since one must look for fee entitlement through an actual contractual fees clause or an enabling statute.  Here, the settlement agreement had no fees clause, and the LLC operating agreement’s fees clause only applied to arbitration efforts rather than the litigation activities which were at issue in this one.  Fee denial affirmed. 

Fee Clause Interpretation: Fee Clause In PPM Did Not Cover Plaintiffs’ Negligence “Lost Investment” Lawsuit

Broader Language Might Have Led To A Different Result.

            Defendant won a negligent “lost investment” lawsuit brought by plaintiffs where there was a private placement memorandum (PPM) with an attorney’s fees clause.  The clause stated:  “If either party commences litigation for the judicial interpretation, enforcement, termination, cancellation, or rescission hereof, or for damages (including liquidated damages) for the breach hereof against the other party, then, in addition to any or all other relief awarded in such litigation, the substantially prevailing party therein shall be entitled to a judgment against the other for an amount equal to reasonable attorneys’ fees and other costs incurred.”   The lower court denied fees to the prevailing defendant, prompting an appeal.

            The fee denial was affirmed by the 4/3 DCA in Hammer v. Strategic Capital Holdings, LLC, Case Nos. G055369/G055430 (4^th Dist., Div. 3 May 31, 2019) (unpublished), authored by Justice Ikola.

            The reason supporting this result was simple:  the fee clause did not reach the negligence suit brought by plaintiffs.  Interpretation of the PPM was not at issue, just its adequacy.  Perhaps a clause more broadly worded to say it encompassed litigation “arising from or pertaining to the PPM” might have invoked fee exposure, but that is not how the clause read which was the subject of judicial review in this particular cause.

Fee Clause Interpretation: “Successor/Agent” Provision In Purchase Agreement Properly Led To Fee Award In Favor Of Prevailing Defendant Agent, Where Plaintiff Did Not Object To Instruction Stating Defendant Was An Agent

$143,775 Was The Fee Tally/$11,438 Was The Costs Tally, With The Appellate Court Chiding Losing Plaintiff For Disparaging Trial Judge And Engaging In “Apophasis.”

            In Mayhew Plaza Woodland Hills II, LLC v. Kelsey, Case No. G055668 et al. (4^th Dist., Div. 3 May 30, 2019) (unpublished), plaintiff purchaser sued defendant seller and defendant agent Kelsey for fraud in connection with the sale of a Hemet shopping center when plaintiff was facing a 1031 exchange deadline in order to avoid a tax hit.  The jury determined that the case was barred by the statute of limitations.  The trial judge awarded defendant Kelsey $143,775 in attorney’s fees and $11,438 in costs based on provisions in the written purchase agreement.

            The 4/3 DCA, in an opinion authored by Justice Bedsworth, affirmed the fee award.

            The purchase agreement had a fees clause as well as a clause indicating that the agreement applied to heirs, successors, agents/representatives, and assigns.  Plaintiff was judicially estopped to deny that defendant Kelsey was an agent, because it did not object to a jury instruction to the effect that Kelsey was an agent.  So, fee entitlement was established.

            However, plaintiff/appellant chose an unwise tactic to disparage the trial judge, but then engaged in “apophasis” by then implying that the trial judge’s personal relationship with several people directly or indirectly involved with the case led to the adverse result.  (In a footnote, “apophasis” was explained as a rhetorical device through which the speaker can deny a subject while bringing it up, with an example being “Far be it from me to suggest ….”).  The 4/3 DCA panel did not countenance the disparagement at all, observing it was a “shabby effort to deflect responsibility” by playing the personal relationships card and defendant was “passing the buck” in an ill-advised attempt to attribute a negative outcome to a judge who presided well over a complex case.

Fee Clause Interpretation, Section 998: Parking Lot Operator Entitled To Attorney’s Fees From Losing Lessee, But Whether Expert Witness Fees Allowed Had To Be Determined On Remand

Trial Court Erroneously Allowed Them Under CCP § 998, But Parking Lot Contract Clause Needed To Be Restudied On Remand To See If Operator Obtains Expert Witness Fees.

            In PCAM, LLC v. Bally Total Fitness of California, Inc., Case No, B277637/B285308 (2d Dist., Div. 8 May 28, 2019) (unpublished), parking lot owner, operator, and lessee got entangled in litigation over responsibility for personal injury settlements, with indemnification and fees clauses in the parking lot contract figuring into the mix.  Operator prevailed against lessee, with the lower court awarding $253,808.55 in fees and $49,925 in expert witness fees based on a rejected CCP § 998 offer.

            The 2/8 DCA affirmed the fee award, finding that the billings submitted were admissible and that the trial court did not abuse its discretion in not apportioning for work associated on different claims.  However, the expert fee award had to be reversed and remanded.  The lower court decided that pre-offer expert expenses were recoverable under section 998, but that was legal error—the statute specifies only post-offer expenses can be recouped.  Nonetheless, the parking lot contract had a clause allowing the prevailing party “to receive attorney fees, costs and expenses from the other party.”  The appellate court believed the fair thing to do was remand for purposes of determining if “expenses” included expert witness fees given that the lower court did not focus on this contract interpretation issue. 

Fee Clause Interpretation, Prevailing Party: Defendant Properly Denied Attorney’s Fees Where Plaintiff Really Obtained All Of Its Relief As The Prevailing Party Under Broad Fees Clause

Defendant Was Denied Fees, But It Did Not Independently Appeal—Maybe Should Have!

            In MBK Properties LLC v. San Diego Beer Co., Inc., Case No. G055856 (4^th Dist., Div. 3 May 28, 2019) (unpublished), seller/plaintiff sold a commercial parcel to buyer/defendant under a written purchase and sale agreement (PSA) which had a contractual fees clause allowing fees to a party “that receives a desired remedy …. substantially equal to the relief sought in an action” or “determined to be the prevailing party by a court of law.”  Seller prevailed based on an equitable subrogation rationale adopted by the lower court.  The lower court determined that seller was the prevailing party, but it denied fees because the trial judge did not believe seller prevailed “on the contract” under Civil Code section 1717—a determination not appealed by seller.  However, the trial judge also denied buyer’s fee request based on the theory that buyer prevailed.

            The 4/3 DCA, in a 3-0 opinion authored by Justice Goethals, affirmed the fee denial by appealing buyer.  The seller, not buyer, prevailed in this action because the fees clause was broad and extended to noncontractual claims such as equitable subrogation.  So, buyer was out of luck because it did not prevail within the meaning of the fees clause.

            BLOG OBSERVATION—Too bad that seller did not appeal the fee denial; might have gotten relief despite the lower court fee denial!

Fee Clause Interpretation: Fee Clause In Rental Agreement Enforced As To Additional Appellate Fees Assessed Against Losing Party

However, Losing Party’s Failure To Appeal Earlier Fee Award Led To The Equitable Resolution By The Appellate Court.

            Adams v. Easley, Case No. C081016 (3d Dist. May 23, 2019) (unpublished) is an interesting case where an in pro per tenant plaintiff was assessed with additional appellate fees of $7,548 in favor of landlord in connection with an earlier appeal.  Previously, plaintiff had been hit with $97,677.50 in fees at the trial court level, something that he apparently did not appeal and was final long ago.  However, plaintiff did appeal the additional fee award, obtaining some measure of relief.  There was an $800 fee “liability cap” in the rental agreement, which the appellate court honored.  Although it could not undo the prior $97,677.50 fee award, the Third District panel decided it could honor this cap by not assessing the additional appellate fees awarded later.

Fee Clause Interpretation, Section 1717: Post-Arbitration Fee Request Denied Because Contract For Which Entitlement Sought Was Never Submitted For Judicial Review

Myriads Of Other Bases For Fee Entitlement, First Introduced On Appeal, Rejected.

            If you are going to seek fee recovery, make sure you put forth all of your bases for fee entitlement at the trial court level. The fee claimant in Glass v. Veros Credit, LLC, Case No. G055257 (4^th Dist., Div. 3 April 30, 2019) (unpublished) learned this lesson the hard way.

           After winning an auto installment contract dispute in an arbitration and gaining a $170,294.50 fee recovery, the winning party sought post-arbitration fees of $17,204.50 for confirming the arbitration award. However, the winner only sought fees based on a contract, never providing it in lower court fee hearings. Both the trial and appellate courts rejected the fee request. Pure and simple, the failure to provide the contract was dispositive. Although winner had a lot of additional fee entitlement bases on appeal, the appellate court thought it unfair to resolve alternate theories never advanced below and to make the appellate court engage in “new” adjudications on appeal. Justice Goethals was the author of the 3-0 opinion.

Costs, Fee Clause Interpretation, Homeowner Associations, Section 1717: Trial Court Properly Denied Fee Recovery To Prevailing Defendants Under Davis-Stirling Act Or Civil Code Section 1717 And Properly Struck The Costs Memorandum

Action Was Based On Tort, Not CC&Rs; Fee Clause Did Not Reach Tort Claims Under Section 1717; And Defendants Failed To Apportion Costs As Between Themselves.

            In the fee area, you must have a solid fee entitlement basis and you usually have to apportion costs where there are several prevailing defendants rather than claim total costs without an appropriate allocation. Schuchmacher v. McDermott, Case No. B288130 (2d Dist., Div. 3 March 28, 2019) (unpublished) is a case where prevailing defendants obtained no fees and costs because they could not establish fee entitlement and did not apportion routine costs.

            Plaintiffs suffered an adverse summary judgment against an HOA’s general manager and its current directors (who were not directors when the main plaintiff owned the condo unit) in a tort action involving insurance fire proceeds. Prevailing defendants moved to recover attorney’s fees of $361,586 and filed to recover $ 27,290 in routine costs. The trial judge denied the fee motion and struck the costs memorandum.

            The 2/3 DCA affirmed. The problem for defendants was that the tort claims were not efforts to enforce governing HOA documents, so entitlement under Davis-Stirling Act’s Civil Code section 5975(c) was lacking. Civil Code section 1717 was of no help either, because the CC&R fee clauses were narrow and did not apply to the tort claims against a general manager or the current directors. With respect to striking the costs, that was no abuse of discretion because defendants claimed all litigation costs, without apportioning between plaintiffs as well as defendants.

Fee Clause Interpretation: Operating Agreement Fees Clause Only Applied To Arbitration Proceedings, Not Court Work

$207,350 Fee Recovery Went POOF! On Appeal.

            In Pasco v. MGK Consulting, Case No. B281144 et al. (2d Dist., Div. 2 March 27, 2019) (unpublished), defendants won a motion for judgment at the close of plaintiffs’ case based on lack of standing for two claims and eventually obtained judgment in their favor as to plaintiffs’ remaining claims. The trial judge awarded fees under Civil Code section 1717 to defendants based on an operating agreement fees clause. The total award was $207,350.

            That all went POOF! on appeal. The reason was simple: the fees clause only encompassed arbitration proceedings, not court litigation. Given that the defense prevailed in court (not arbitration), no fee recovery was contractually allowable.

Fee Clause Interpretation, Section 1717: $40,642 Contractual Fee Recovery Affirmed On Appeal

Storage Facilities Had A Clear Fee Entitlement Provision, With Another Provision Not Capping Them At All—With Reasonable Fees Being The Only Limitation.

            In Enjati v. Big Bear Moving, Inc., Case No. E068332 (4^th Dist., Div. 2 Mar. 13, 2019) (unpublished), defendants were awarded contractual attorney’s fees after prevailing at trial on a storage facility dispute. Defendants sought $47,292 in fees, but they were awarded $40,642 instead. Losing plaintiff appealed, to no avail. Plaintiff could not beat the fact that there was a fee entitlement contractual provision, which was not capped by another provision which only put a “reasonable fee” limitation generally applicable under Civil Code section 1717 anyway on fee recovery. Fee award affirmed.

Fee Clause Interpretation, Settlement: No Abuse of Discretion And No Error By Trial Court In Finding The Parties’ Settlement Agreement Valid And In Awarding Attorney Fees Of $83,340.22 To Defendants For Enforcement Of Settlement Agreement

Plaintiff Hit With Attorney Fees Provision In Valid Settlement Agreement After Unsuccessfully Attempting To Back Out

        In Martello v. Buck, Case No. B285001 (2d Dist., Div. 1 March 1, 2019) (unpublished), Plaintiff Doctor sued Defendants Patient husband and his wife for defamation, assault, and intentional infliction of emotional distress after Defendants expressed dissatisfaction with Plaintiff’s billing practices on the internet. Defendants filed a cross-complaint for malicious prosecution, claiming Plaintiff had pursued litigation to collect on medical “balance billing” that Plaintiff knew to be illegal as they alleged she had been ordered by the Dept. of Managed Health Care to cease and desist from balance billing her patients. Balance billing is the practice of charging patients for the amount of the bill not covered after the insurance company pays its obligation, and patient has paid his/her deductible, copays, etc. It is illegal in California.

        In the underlying case, Plaintiff Doctor had obtained a default judgment against Defendants for the unpaid balance of the medical bill, and had attempted to collect by forcing a sale of Defendants’ home. Defendants were able to obtain relief from the default judgment and avoid sale of their home.

        The parties settled their claims against each other after months of negotiations. However, Plaintiff changed later changed her mind and refused to enter the settlement agreement in court. Afterward, following a bifurcated trial, the trial court found the settlement agreement to be a valid contract and dismissed the case pursuant to the agreement. The trial court also awarded Defendants $83,340.22 in attorney fees, pursuant to the terms of the settlement agreement, for their efforts in enforcing the agreement. Plaintiff appealed.

        In considering Plaintiff’s arguments on appeal, the 2/1 DCA concluded that the trial court had properly held a trial to determine if a valid settlement agreement existed between the parties, and had not abused its discretion by admitting the parties’ confidential settlement communications into evidence to determine whether a binding agreement existed. The 2/1 DCA then turned to Plaintiff’s argument that the trial court erred in awarding attorney fees to Defendants because the settlement agreement provided attorney fees for the enforcement of the agreement – not to establish whether there was a settlement agreement. It found the purpose of determining whether the settlement agreement was valid was to determine whether it could be enforced against Plaintiff, and that the immediate consequence of the trial was enforcement of the agreement and dismissal of the case – therefore no error. The trial court had properly awarded attorney fees to Defendants for enforcement of the settlement agreement.

Fee Clause Interpretation: “Arising Out Of This Transaction” Language In Attorney-Client Engagement Letter Is Broad Enough To Allow Fee Recovery For Legal Malpractice And Contract Win By Former Law Firm Against Suing Former Client

Failure To Specify To Whom Fees Were Paid Was Not Fatal Either.

            In Juarez v. Law Firm of Higbee & Associates, Case No. G054016 (4^th Dist., Div. 3 Feb. 28, 2019) (unpublished), former law firm won a summary judgment against a former client who sued for legal malpractice and breach of the engagement contract after law firm represented client in a marital dissolution action. Law firm then moved for fees based upon a provision in the engagement agreement, which read as follows: ““VENUE & COSTS. Disputes arising out of this transaction shall be adjudicated in Orange County Superior Court in the State of California. Losing party to pay attorney’s fees and court costs.” The lower court awarded law firm $32,645.50 in fees, prompting an appeal by the former client.

            The Fourth District, Division 3 affirmed in an opinion authored by Justice Fybel.

            Client argued that the failure to define “transaction” meant that the fee clause did not apply and that the failure to specify to whom fees paid made the clause hopelessly ambiguous. Because contracts are to be construed as a whole and in order to not render language surplusage in nature, the 4/3 DCA determined that it was contextually clear that the losing party would pay fees to the prevailing party and that “transaction” encompassed the contractually agreed-upon services rendered under the engagement letter when wording throughout was considered.

Fee Clause Interpretation, Mediation: $331,385 Contractual Fee Award Affirmed Because Absence Of Parol Evidence Did Not Show Fees Clause In One Contract Had A Mediation Condition Precedent

Absence Of Parol Evidence/Reporter’s Transcript Sealed The Result.

            If you are going to argue that a fees clause in one contract also governs another contract between different parties, you better introduce parol evidence to prove it. The loser in a fee battle did not do that in Morales v. Thee Aguila, Inc., Case No. G055224 (4^th Dist., Div. 3 Jan. 25, 2019) (unpublished), much less provide a reporter’s transcript, translating to a loss on appeal.

            Appellant lost an attorney’s fees battle to the extent of a $331,385 exposure based on a two-page handwritten contract with a fees clause. However, appellant claimed that a different contract involving different parties had a mediation condition precedent to fee recovery which was not followed so as to overturn the fees award at issue. The problem here was essentially one of proof: appellant introduced no parol evidence and did not provide a reporter’s transcript of what was offered into evidence below. Given the lack of parol evidence, the objective rule of contractual interpretation applied. There was a provision saying that prior agreements were incorporated into the contract as between the parties; however, given that the fees clause in the second contract involved different parties, there could be no carry-over of the mediation requirement from the second contract. Fee award affirmed.

            Justice Goethals authored the 3-0 decision for the 4/3 DCA.

Fee Clause Interpretation, Section 1717: Defendant Prevailing In Easement Dispute Was Entitled To Contractual Fee Award

Easement Agreement Fees Clause Was Broad Enough To Allow For Fee Entitlement.

            In Stark v. Ortiz, Case No. A153680 (1^st Dist., Div. 5 Jan. 24, 2019) (unpublished), defendant won contractual fees in a neighboring landowner easement dispute against a plaintiff. The parties had an Easement Agreement with a fees clause encompassing “any legal action or proceeding arising out of or relating to” the Easement Agreement. The trial court found in favor of defendant on plaintiff’s complaint after defendant dismissed a cross-complaint. The lower court awarded all fees to defendant except for ones relating to the dismissed cross-complaint.

            Plaintiff’s appeal of the fee award was not successful. The fees clause was broad enough to encompass both the declaratory relief claim (for sure) and the intertwined tort claims brought by plaintiff, all of which involved the scope of the Easement Agreement.

Fee Clause Interpretation, Prevailing Party: $53,791.79 Fees/Costs Award To Tenant And Against Landlord Affirmed On Appeal

Fee Clause “Any Right” Language Allowed Tenant To Recover For Landlord’s Misrepresentations.

            Zhang v. Cheung, Case No. B282132 (2d Dist., Div. 7 Jan. 16, 2019) (unpublished) involved a situation where a landlord won only $16,200 in damages for breach of a lease, while tenant won $30,078.85 in damages from landlord for intentional misrepresentation and negligence. The lease had a fees clause providing recovery to prevailing litigant in situations “to enforce any provision of this lease or any right of either party hereto ….” The lower court awarded fees and costs of $53,791.79 to tenant as the prevailing party in the litigation. (The trial judge, while the matter was on appeal, vacated the fee award and then later reinstated it, with the appellate court only looking to the initial fee award given that the vacation order was void once the appeal was filed.)

            The 2/7 DCA upheld the fees/costs award. The “any right of either party” language was broad enough to encompass tenant’s victory on the misrepresentation/negligence claims. Because the jury awarded more to tenant than landlord, tenant was the successful party. Landlord then asked the appellate court to limit his liability to his equity in the property based on a lease limitations provision, but that only applied to any lease claims rather than the tort claims under which tenant was victorious.

Fee Clause Interpretation, Family Law: Husband’s Fees In Defeating Wife’s Orange County Action, Although Stipulated Judgment Entered In Los Angeles Family Law Court, Was Allowable Under Wording Of Stipulated Judgment Fees Clause

“Court Intervention” Language Not Limited To Just One Court, 2/1 DCA Concludes.

            In Pont v. Pont, Case No. B284064 (2d Dist., Div. 1 Dec. 20, 2018) (unpublished), ex-husband was awarded $90,000 in attorney’s fees and costs for defeating ex-wife’s claim that he siphoned off community assets in an Orange County action, after the parties had entered into a stipulated judgment with a fees clause in Los Angeles County family law court. The fees clause covered a prevailing party involved in a “court intervention . . . in connection [with the stipulated judgment].” Both the trial and appellate court had no difficulty concluding that husband’s Orange County victory qualified him as the prevailing party, not just limited to the Los Angeles County family law court producing the entry of the stipulated judgment. Husband obtained a dismissal at the demurrer stage, so that this certainly was a prevailing “win.” Finally, hourly rates ranging from $120-800 per hour for his attorneys was sustained as reasonable given this was a family law matter (although the lower court did note that the $800 mark was at the high range of fees for this type of matter).

Fee Clause Interpretation: Broad Settlement Agreement Fees Clause Allowed For Recovery Of Fees In Fraudulent Stripping Of Assets Case

$188,000, After About $86,000 Reduction, Was The Sustained Fee Award.

            In Langer’s Delicatessen, Inc. v. Sino Enterprises, Inc., Case No. B287333 (2d Dist., Div. 4 Nov. 28, 2018) (unpublished), plaintiff won an action for fraudulent stripping of assets by a defendant based on a prior judgment and a settlement agreement. The settlement agreement had a broadly worded fees clause such that the trial judge awarded $188,000, about $86,000 less than the requested amount. The fees clause was broadly worded such that it allowed for fee recovery, with the court not having to address the fact fee authorization is not discussed under California’s voidable transfer statute.

Fee Clause Interpretation, Reasonableness Of Fees: Appellant’s Failure To Discuss Fee Clause Entitlement Under Note Fees Clause And Failure To Provide Reporter’s Transcript (RT) Of Fee Hearing Doomed Merits Of Her Appeal

Absence Of RT Can Be Fatal Indeed, Meaning Inadequate Record On Appeal.

            Appellants need to address legal fee entitlement bases and provide a reporter’s transcript of a fee hearing when challenges are made to either the merits or the amount of fees awarded. We have posted many times about how appellate courts will rebuff fee award challenges where no reporter’s transcript is provided, something that the Second District, Division 5 is especially prone to do unless only legal issues are involved in the fee challenge. Vyas v. Berman, Case No. A149220 (1^st Dist., Div. 2 Sept. 27, 2018) (unpublished) follows that trend.

            Appellant argued that the post-judgment award of $46,820 in fees was in error. However, with respect to fee entitlement, she could not demonstrate any infirmity given the failure to discuss a promissory note fees provision which facially did allow for fee recovery to the prevailing party (appellant’s opponent below). On the claim that the amount of fees was excessive and unreasonable, appellant’s failure to provide a reporter’s transcript doomed the appeal based on the failure to present an adequate record for purposes of assessing this challenge. (Vo v. Las Virgenes Municipal Water Dist., 79 Cal.App.4^th 440, 447 (2000).)

Fee Clause Interpretation: $178,255 Fee Award Against Guarantor Reversed As A Matter Of Law

Reason Was That Guarantor Guaranteed Orally, Not Assuming The Fee Clause Liability Under The Guaranteed Note With A Written Fees Clause.

            In Khodagulyan v. Aminpour, Case No. B270330 (2d Dist., Div. 3 Sept. 6, 2018) (unpublished), a cross-complainant was found to be a prevailing party because he had incurred attorney’s fees to collect on a note as against cross-defendants found to have orally guaranteed the note. The lower court awarded cross-complainant $178,255 in fees, jointly and severally against the cross-defendants, based on the fees provision in the note.

            All of that fee recovery went POOF! on appeal.

            The reason for this reversal was that appealing parties only orally guaranteed the note payment amount, with nothing indicating that they agreed to pay the amount due under the note according to the terms of the note. Simply agreeing to orally guarantee payment did not mean the guarantors agreed also to pay other obligations under the note, including responsibility under the fees clause.

Deed Of Trust, Fee Clause Interpretation: Deed Of Trust Fees Clause Did Not Justify Recovery To Successful Litigant Really Suing For Real Estate Option To Purchase Agreement Lacking A Fees Clause

Deed Of Trust Fees Clause Was Not Broad Enough To Encompass Real Estate Option Dispute.

            We have somewhat, on a syllogistic basis, indicated how one can achieve success on a fee petition in past posts—and we may give more clues to follow in future posts.

However, the first element is FEE ENTITLEMENT. You need a statutory or contractual basis for fee recovery. On a contractual basis, this means a laser focus on the terms of the fees clause to determine if it captures the disputes on which a judgment or resolution was reached. The next case shows how a successful result under one agreement, without a fees clause, and under another agreement, with a fees clause, may not entitle one to fees depending on what agreement really governed the dispute. If the dispute was governed under an agreement without a fees clause, you are out of luck!

In New Life Oasis Church v. Central Korean Evangelical Church, Case No. B284456 (2d Dist., Div. 4 Aug. 20, 2018) (unpublished), there was a longstanding dispute between parties as to the ownership of a Koreatown church property in Los Angeles. Plaintiff ultimately won a judgment to enforce a lease option to buy defendants’ church property, although nothing in the lease option document had an attorney’s fees provision. However, plaintiff was given a trust deed to secure an option security deposit on the Koreatown property, which did not contain an attorney’s provision indicating that the trust deed trustor would “ . . . appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary [Plaintiff] or Trustee; and to pay all costs and expenses, including costs of evidence of title and attorney’s fees in a reasonable sum, in any action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed.” The trial judge found that this provision allowed the plaintiff to recover attorney’s fees of $285,025 against the defendants as the prevailing party.

The fee award was reversed as a matter of law by the appellate court upon review.

Nothing demonstrated that the two agreements were linked or incorporated by reference so as to justify a fee award based on a deed of trust fees clause which was divorced from plaintiff’s option agreement win. In fact, the reviewing court did place emphasis on punctuation marks in the written clause which influenced its decision.   (Dow v. Lassen Irrigation Co., 216 Cal.App.4^th 766, 783 (2013).) All of the punctuation and context of the trust deed provision showed it applied to narrow trust deed enforcement, not broader lease option concerns. Given the narrower scope of the DOT clause, fee recovery was not proper.

Fee Clause Interpretation: 4/3 DCA Reverses $9,000 Fee Recovery Against Estate’s Personal Representative/General Partner Who Was Not A Party To The Agreement With Fees Clause

Fee Clause Was Also Broad In Scope, But Nonsignatory Individuals Were Not Party To The Underlying Agreement.

            In Mayhew Plaza Woodland Hills II, LLC v. Kelsey, Case No. G054435 (4^th Dist., Div. 3 Aug. 6, 2018) (unpublished), plaintiff dismissed an individual defendant in his capacity as representative of an estate in an action alleging only tort claims, with the individual defendant later awarded $9,000 in attorney’s fees under a broad fees clause in a purchase agreement. The fees clause broadly stated: “In any litigation, arbitration, or other legal proceeding which may arise between any of the parties hereto, including Agent, the prevailing party shall be entitled to recover its costs, including costs of arbitration, and reasonable attorneys’ fees in addition to any other relief to which such party may be entitled.”

            The 4/3 DCA, in an opinion authored by Justice Bedsworth, reversed. The problem was that “Agent” was specifically defined to be a broker in the transaction. Another flaw was that none of the individuals named in the action were “parties,” as distinct from the signatories (such as a limited partnership). The general partner was not liable for fees simply because he signed a contract on behalf of a limited partnership. “Nothing in this agreement indicates that the parties intended an already wide-ranging fee provision would apply to anyone who happened to get swept up in litigation between the contracting parties.” (Slip Op., p. 9.) Similarly absent was any showing that the agreement was intended to benefit the general partner individual defendant. (Whiteside v. Tenet Healthcare Corp., 101 Cal.App.4^th 693, 709 (2002).)